Although the crypto market has seen a noticeable rebound in the past weeks, the behind-the-scenes of major assets such as Bitcoin and Ethereum suggest that new investors are still yet to enter the market despite the recovery.
Particularly, the number of active Bitcoin and Ethereum addresses has steadily declined since the beginning of 2024, raising concerns about new investor participation in the market.
New Crypto Investors Decline: Bitcoin And Ethereum Addresses
According to Burak Kesmeci, an analyst at CryptoQuant, the downtrend in both Bitcoin and Ethereum addresses signals that the influx of new participants, which is crucial for a strong market rally, is lacking. The analyst noted:
We’re still playing to ourselves. New investors aren’t entering the crypto space.
Kesmeci’s analysis shows that this plunge comes despite anticipating fresh capital inflow. Additionally. The CryptoQuant analyst emphasizes that this decline in active addresses for Bitcoin and Ethereum suggests that the “hype” expected in the space hasn’t yet materialized.
Notably, the data shared by the analyst illustrates a significant drop in activity: Bitcoin’s active addresses have decreased from 1.17 million in January to 855,000.
Ethereum’s active addresses have also fallen from 382,000 to 312,000 since the start of the year. These figures highlight the stagnation in investor interest and pose questions about what it might take for the market to turn bullish once more.
An influx of new investors is generally required for a market to thrive and see upward momentum. According to Kesmeci, the lack of new investors is a central reason why the expected rally in the crypto market has not yet materialized.
He argues that while liquidity and institutional investors waiting for spot exchange-traded funds (ETFs) have already entered the crypto market, this is not necessarily reflected in on-chain activity.
The analyst also mentioned that despite this capital infusion, the drop in active addresses indicates that overall market excitement has not yet reached its potential.
Why No New Investors Yet And What Could Change The Trend?
Kesmeci attributes part of this stagnation in new investors to the Federal Reserve’s ongoing quantitative tightening (QT) policy, essentially the withdrawal of liquidity from financial markets.
According to the analyst, this tightening could contribute to the subdued activity in the crypto space, as it impacts the amount of available capital that could be invested in risk assets like cryptocurrencies. However, the analyst mentioned some slight increases in the M2 money supply.
According to Kesmeci, the current situation in the market could pivot when the Federal Reserve eventually shifts back to a policy of quantitative easing (QE), which would involve pumping liquidity back into the market.
The analyst suggests that this shift would likely bring the long-anticipated hype and could lead to a rise in active addresses. Quantitative easing has historically been associated with increased investment in riskier assets, including cryptocurrencies, as liquidity flows into various financial market sectors.
Despite the current scenario, Kesmeci emphasizes “patience,” noting at the end of the post: “Patience is a steel shield.”
Featured image created with DALL-E, Chart from TradingView
